Johncom reports mixed interim results, eliminates debt

Group CEO Connie Molusi stressed that the bulk of the group`s earnings come in the second half of the year, from increased trading over the Christmas period, and that prospects for the full year (to end March 2004) were encouraging.

"We're already seeing stronger trading since the start of the second half from October onwards," said Molusi. "This is being aided by lower interest rates, together with declining inflation."

And positive news is that Johncom has eliminated its debt. Group Finance and Operations Director Prakash Desai reported that the net finance cost of prior years had been reversed with net debt beingeliminated. "The Group's effective tax rate has also been reduced to align more closely with the standard tax rate," said Desai.

For the first six months, the Group's revenue from ongoing operations rose by 3% to R1 268 million from R1 230 million the previous year. Earnings before interest, tax and amortisation (Ebitda) fell by 23% to R64 million from R83 million in 2002.

"In tough economic times, the advertising market is always squeezed. This impacts our media businesses, such as Sunday Times, Business Day and Financial Mail, contributing to the decline in Ebitda. In addition, we have incurred costs on approved ventures to launch our expansion strategy into Africa," said Molusi.

Johncom recorded an exceptional profit amounting to R69 million from the sale of MTN and Naspers shares. This was partially offset by the closure costs of Hammicks Bookstores Limited in the UK and the provision for certain non-trading Nu Metro cinema theatre complexes. The result is a net exceptional profit of R44 million.

Desai said that the impact of accounting standard AC133 had a material effect on Johncom's share of profits from associates M-Net and SuperSport, in each of which Johncom has a 26,03% interest. "Johncom's share of the current period charge to the income statement by M-Net and SuperSport on the adoption of AC133 is R88 million and is offset by a tax benefit of R26 million," explained Desai.

Molusi said that the Group's recently adopted corporate vision to build a single, integrated entertainment and media group was designed to maximize value for shareholders. The alignment of the Group's legal structure with the operational structure was now underway to address inefficiencies of duplication, funding and taxation.

Turning to operations, Molusi said the Books and Maps South African operations had performed well, yielding turnover growth of 14% and lifting Ebitda by 29% compared to the prior year. Revenue growth of 12% boosted Exclusive Books' performance, whilst businesses that were formerly housed in the Digital Division also traded profitably at Ebitda level, as compared to a loss in the same period last year.

Johncom Africa had made good progress in exploring opportunities for the Group in the new markets and territories within sub-Saharan Africa. Key opportunities had been identified in home entertainment, book publishing, newspaper publishing, cinemas and retail in several countries north of the SADC region.

"The second half of the year traditionally delivers most of the Group's revenue and earnings, benefiting in particular from increased trading levels over the Christmas season. Thus we're optimistic that our various business units will perform well in the second six months, yielding growth in revenue and earnings that will compensate for the lower performance in the first half," said Molusi.